Home Price Increases Depends on Foreclosure Sales – Developments – WSJ

Where will home prices head this fall? It depends, in large part, on how many more foreclosures are made available for sale, as a new study by LPS Applied Analytics, a real-estate research firm, makes clear.

LPS looked at the link between sales of bank-owned foreclosures (known as REO, for real-estate owned) and the rate of home price declines. In Michigan, for example, REO accounted for 64% of sales in the first half of 2009. Home prices declined by 47% over that time, though the decline falls to just 26% when excluding REO properties.